Ligand stimulation of PDGF beta-receptors leads to autophosphorylation of the regulatory tyrosine 857 and of tyrosine residues that in their phosphorylated form serve as docking sites for Src homology 2 domain-containing proteins. Regulation of the PDGF beta-receptor by protein-tyrosine phosphatases is poorly understood. We have investigated PDGF beta-receptor dephosphorylation by receptor-like protein-tyrosine phosphatase DEP-1 using a cell line with inducible DEP-1 expression and by characterizing in vitro dephosphorylation of the PDGF beta-receptor and of receptor-derived phosphopeptides by DEP-1. After DEP-1 induction PDGF beta-receptor.DEP-1 complexes and reduced receptor tyrosine phosphorylation were observed. Phosphopeptide analysis of the PDGF beta-receptors from DEP-1-expressing cells and of the receptors dephosphorylated in vitro by DEP-1 demonstrated that dephosphorylation of autophosphorylation sites of the receptor differed and revealed that the regulatory Tyr(P)(857) was not a preferred site for DEP-1 dephosphorylation. When dephosphorylation of synthetic receptor-derived peptides was analyzed, the selectivity was reproduced, indicating that amino acid sequence surrounding the phosphorylation sites is the major determinant of selectivity. This notion is supported by the observation that the poorly dephosphorylated Tyr(P)(562) and Tyr(P)(857), in contrast to other analyzed phosphorylation sites, are surrounded by basic amino acid residues at positions -4 and +3 relative to the tyrosine residue. Our study demonstrates that DEP-1 dephosphorylation of the PDGF beta-receptor is site-selective and may lead to modulation, rather than general attenuation, of signaling.